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Inside Canada's best boards

Leaders say that after much difficult reform, boards now must turn their attention to the execution of strategy

The Globe and Mail, Oct. 12, 2004

Arthur Sawchuk believes it is time for corporate boards to go beyond the current preoccupation with protecting value and get back to the business of creating it. ''If you don't start creating value, somebody else out there is going to eat your lunch,'' warns Mr. Sawchuk, chairman of Manulife Financial Corp.

"What goes on in the boardroom has to come back to spending more time on the future and the opportunities and a little less time on what I'll call covering your butt," he said in a recent interview.

Manulife finished with top marks in the Report on Business assessment of corporate boards this year, a place it also claimed in 2002, the first year of the ranking. Since then, no one could accuse the Toronto-based insurer of shying away from opportunity. In April, it closed an $18-billion merger with Boston-based John Hancock Financial Services Inc. that made it the largest company in Canada measured by market capitalization.

Mr. Sawchuk said such bold moves are necessary if Canadian companies are going to "grow up" and play on the international stage. And to do that, Canadian boards must also raise their game and make sure they are fully engaged.

It's a challenge that many of Canada's top boards face.

After years of making changes to board structures such as separating the jobs of chairman and chief executive officer and developing new such practices as director reviews and private, director-only sessions, the leaders of many of this year's top-ranking boards say their primary focus must be on getting the job done.

While none say they are finished with governance reforms and many say there is still plenty of work to be done, particularly in the areas of executive compensation and improved disclosure, they say their main focus must be on execution at the board level.

More often than not, that involves the development of strategy for international expansion and overseeing the implementation of those plans.

"Almost every board I sit on, one of the big challenges for the company is how do they grow internationally, and that is a tough issue," said David O'Brien, who is chairman of both Royal Bank of Canada and EnCana Corp., and a director on several other major boards. "Every board has to face how do you get out there and do it and do it effectively and have the time to get results from it as opposed to having everyone yelling at you in the first year. It is not easy."

Royal Bank, which finished fifth in this year's ranking along with six other companies, is widely expected to take a writedown on its troubled U.S. expansion efforts.

Mr. O'Brien, former CEO of the old CP conglomerate before it was split up, also sits on the board of Fairmont Hotels & Resorts Inc., where he has had a front-row seat to the perils of foreign expansion.

The luxury hotel chain took it from all sides in recent years with its revenues rocked by terrorist fears, wars, hurricanes and the SARS outbreak -- all events that were never anticipated in any strategic planning board retreat. The company made it through those challenging times, he said, because management and the board had crafted a robust plan that stood up to the crisis.

"You have to be realistic. Business is business," he said. "Even with the best minds working on an issue, changed circumstances can result in difficulties."

For that reason, he said, it is critically important at such times that directors do their job. "The board better be engaged and have enough knowledge." Mr. O'Brien said, calling it, "early days" for RBC's U.S. efforts. "It is tougher doing something outside your own territory. "

David McLean, chairman of Canadian National Railway Co., another firm that tied for fifth, said major expansion or sales of existing holdings by their very nature demand that directors step up to the plate.

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